ActivePlatform for ISVs: billing options for SaaS products

If you're an ISV looking to sell your SaaS product through a subscription model, you've got several options to consider. Each one can make a big difference in how your customers perceive value and how you generate steady revenue. Let's break down some typical options you can leverage with ActivePlatform and its automated billing capabilities.
Automated billing for ISVs

Billing frequency

Billing frequency refers to how often customers are billed for your SaaS product. This affects both customer flexibility and revenue predictability.

  • Monthly billing: This flexible option allows customers to pay on a month-to-month basis. It appeals to those who want a lower initial commitment or are testing your product. The trade-off for you is that it often means more customer churn, but it also tends to come with a higher monthly price point.
  • Annual and multi-year billing encourages users to commit for a longer period, usually offering a discount compared to monthly rates. It helps lock in revenue and keeps customers engaged for at least a year. The main advantages here are predictable cash flow and reduced churn, but it can be a bigger barrier for new customers who are wary of a long-term commitment.

ActivePlatform allows you to set any custom billing period in days, months, or years. Additionally, you can set a one-time payment linked to the period rather than to licenses. In this case, your customers will be charged a fixed fee on purchase and every renewal, regardless of the number of licenses.

User license commitment

While meeting customer growth needs, you can apply different approaches to user licensing and commitment strategies that help ensure predictable revenue.

  • Per-user licensing: You can charge customers based on the number of users accessing your SaaS product. This model is great because it scales with your customer's growth. Larger teams pay more, which directly correlates to the value they're getting.
  • Tiered user licensing: You can offer different tiers of licenses, such as "Starter," "Professional," or "Enterprise," with user count limits and associated feature sets. This allows customers to grow into more expansive plans as they need more licenses.
  • Minimum license commitment: Some companies require a minimum number of licenses to be purchased, especially for team plans. This ensures a base level of revenue, especially for larger, more feature-rich versions of your product.
  • Term commitment: Similar to Microsoft's New Commerce Experience (NCE), you can require customers to maintain the number of licenses they've purchased until the end of their billing period, allowing only upgrades during that time. Under this model, customers cannot reduce the number of licenses mid-term, which provides predictable revenue and reduces fluctuations. Customers can add licenses or upgrade plans during the term, but any downgrades must wait until renewal. Offering this kind of structure helps create stability for both you and the customer, especially if incentivized with discounts for longer-term commitments.

ActivePlatform supports all the options and is perfectly aligned with the Microsoft NCE terms, so you can rely on them like ready-to-use best practices. Alternatively, you can combine them to create your own billing model.

Prorate charging

Prorating is about adjusting charges when users change their plan mid-cycle.

  • Prorated upgrades. Let's say a customer wants to add more users or upgrade features halfway through the billing month; prorating means you'd charge them only for the portion of the billing period they're upgrading. This makes for a fairer, more transparent billing experience, especially if customers' needs fluctuate.
  • You can also use proration for downgrades or when licenses are removed, so customers aren't stuck paying for unused services. While this approach is customer-friendly, it does add complexity to the billing system, which can be worth it for maintaining happy users.

ActivePlatform smoothly handles upgrades and downgrades with prorate and without it. When your customer adjusts the number of licenses, the platform calculates the refunds and additional payments with daily granularity.

Usage-based billing (pay-as-you-go)

If it fits your product, you can include usage-based billing. This means that some parts of the subscription price scale with how much the product is used, such as data storage, API calls, or number of transactions. This is particularly useful if you want customers to feel they're paying only for the value they extract, but it adds unpredictability to their bills, which some might shy away from.

For PAYG services, ActivePlatform helps build trust and bring predictability with analytics tools. They include a visual part with various diagrams and a reporting part where customers can set automatic monthly report generation and create more consumption reports on the fly.

ActivePlatform can also detect consumption spikes and monitor monthly budgets to alert customers promptly.

Freemium or trial periods

Freemium and trial periods are effective strategies for attracting new users. These approaches lower the barrier to entry, allowing potential customers to experience the value of your product before committing, which can ultimately lead to higher conversion rates.

  • Free trials: Offer a free trial of your product, usually 7, 14, or 30 days, to give potential customers a hands-on experience. Trials can help showcase your value before asking for a commitment.
  • Freemium model: Provide a basic version for free and charge for more advanced features or greater usage. This model works well to build a user base and convert free users into paying customers over time.

With ActivePlatform, you can offer trial periods of any duration and include any free licenses in a subscription while charging for additional seats.

Add-ons and plan switching

While add-ons can be separate subscriptions to features exclusively available to customers who already have a basic product, switching is more like transferring all purchased licenses.

  • You might have core features in your base subscription plan but offer premium add-ons for things like AI tools, advanced analytics, integrations, or priority support. This lets customers customize their subscription based on their needs, making the pricing more modular and tailored.
  • Allowing customers to switch plans easily (e.g., from monthly to annual, or between different user license levels) helps reduce churn and keeps customers satisfied, especially as their needs evolve. The easier you make it for them to adjust their commitment, the more likely they are to stick around.

ActivePlatform supports plan switches in two ways: immediate and delayed. Customers can use the immediate switch anytime during the subscription period (mid-term), while the delayed switch is combined with the subscription renewal. This means that customers can plan their transfers in advance, and the platform seamlessly switches a subscription and extends it to the next period, reducing the number of operations. Which switch options will be available to your customers — it's totally up to you.

ActivePlatform: Automated billing for ISVs

Each option gives you different levers to pull depending on your target audience and growth strategy. For instance, startups often lean towards monthly plans with more flexibility, while businesses looking for cost efficiency might be more open to annual plans with added discounts. The key is to strike a balance that works both for your cash flow and your customer base, making it easy for them to start, stick around, and scale.

It may sound complicated, but with ActivePlatform, you can easily configure all billing options using predefined templates and tailor them with custom service terms while maintaining control over pricing and margins, ensuring your business goals are met. Book your demo today, and we'll be happy to show the full power of automated billing in ActivePlatform!
About ActivePlatform
ActivePlatform is a full-service automated cloud brokering solution for cloud service providers and internal IT hubs that makes it easier to manage and control the cloud delivery and profitability. ActivePlatform unites vendors, providers, developers, and resellers into a single ecosystem for buying, selling, and managing cloud services. With its open vendor integration framework, ActivePlatform creates a vibrant catalog of cloud services ultimately helping businesses gain access to the services they need to thrive.
ActivePlatform enables SaaS, PaaS, IaaS aggregation, delivery, and monetization, provides simplified administration through central management, and enables critical visibility into resellers and cloud services consumption and usage. The platform has implementations with distributors, cloud solution providers, and telecom operators. ActivePlatform is headquartered in Europe.
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